2018 ONSC 3250

COURT FILE NOS.: 02-CV-239811-00 & 00-CV-198836

DATE: 20180524

SUPERIOR COURT OF JUSTICE - ONTARIO

RE:

Marvelous Mario’s Inc., Snack Crafters International Inc. 788986 Ontario Inc., 601552 Ontario Ltd. and Mario Parravano

AND:

St. Paul Fire and Marine Insurance Co.

AND RE:

Sweet-Ease Inc., Bakemates International Inc. formerly 1317613 Ontario Ltd., Confectionately Yours Bakeries Inc., Marmac Holdings Inc., formerly 1039411 Ontario Ltd., 788986 Ontario Ltd., Mario Parravano and Marvelous Mario’s Inc.

AND:

St. Paul Fire and Marine Insurance Co.

BEFORE: Akbarali J.

COUNSEL: Maurice J. Neirinck for the Plaintiffs

David A. Tompkins and Trevor J. Buckley for the Defendant

HEARD: In Writing

ENDORSEMENT

[1] On April 6, 2018 I released reasons in the coverage trial of these two actions: 2018 ONSC 1365. I dismissed the first action, bearing court file number 00-CV-198836, and dismissed some but not all claims in the second action, bearing court file number 02-CV-239811-00. I directed the parties to deliver costs submissions if they were unable to agree on costs.

[2] The parties have agreed that the costs of the second action should be determined at the end of the trial that must yet be held to determine the quantum of the plaintiffs’ losses with respect to the claims that have not been dismissed.

[3] These reasons thus deal only with costs of the first action.

[4] The parties agree that St. Paul is entitled to its costs of the first action on a partial indemnity scale. They disagree about the quantum of costs that is appropriate.

[5] Fixing costs is a discretionary decision under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The discretion must be exercised in accordance with the factors set out in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the principle of indemnity, the reasonable expectations of the unsuccessful party and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), 2004 14579 at paras. 26 and 37, 71 O.R. (3d) 291.

[6] St. Paul seeks costs of $200,000 including HST and disbursements. Its bill of costs discloses fees of $179,968.25 and disbursements of $66,551.93. After HST, the bill of costs totals $275,956.15.

[7] The plaintiffs argue that the costs sought are too high. They argue for certain deductions from St. Paul’s bill of costs which, if applied as they suggest, would result in a costs award of $83,207.58.

[8] First, the plaintiffs argue that the bill of costs must be reduced because the costs claimed relate to more than just the first action. The bill is in respect of both the first and second action and also in respect of an action which both preceded and was related to the first action. This earlier action was almost identical to the first action, except that it was brought by only some of the plaintiffs in the first action. The plaintiffs in the earlier action went into receivership, after which the first action was commenced by those same plaintiffs (without the involvement of the receiver) and other related companies. The earlier action was settled by St. Paul with the receiver.

[9] The plaintiffs argue that the costs claimed should be reduced by 50% to reflect the other actions. They state the first and second action proceeded in tandem with common steps including common discoveries.

[10] St. Paul argues that the first action was the more significant action of the two (the earlier action having been resolved long ago). The first action sought damages of over $6 million. As a result, a greater proportion of time relates to the first action. Moreover, although the bill discloses costs of $275,956.15, St. Paul seeks only $200,000 in respect of the first action.

[11] I accept the plaintiffs’ argument that the total costs reflected on St. Paul’s bill of costs includes costs of the second action and some costs related to the earlier action. Some deduction for costs is appropriate. However, it is not possible from the invoices to tell how much of the costs relate to which action. I accept St. Paul’s submission that the first action was the most significant and the costs related to it are therefore more than 50%. In the circumstances, I find that 65% of the costs incurred relate to the first action. Thus, $179,371.50 are the costs St. Paul incurred related to the first action as disclosed by its bill of costs.

[12] The plaintiffs also argue that the costs sought should be further reduced because the bill of costs reflects substantial indemnity costs and St. Paul is only entitled to partial indemnity costs.

[13] St. Paul argues that it is entitled to claim the amounts it seeks on a partial indemnity basis, even though the amount it seeks is more than 65% of what it was actually billed. St. Paul negotiated a favourable rate from counsel, but that is not a reason to diminish its recovery as long as the total indemnity does not exceed the fees actually charged: Mantella v. Mantella, 2006 CarswellOnt 3176 at para. 7, Hervé Pomerleau Ontario Inc. v. Ottawa (City), 2014 CarswellOnt 2727 at para. 10.

[14] I agree with St. Paul. The goal in fixing costs is not to limit the actual recovery to ensure that it is partial, but rather to consider the pertinent factors to determine the amount of recovery that is appropriate on a partial indemnity basis.

[15] With respect to those factors, I note:

a. The issues in the litigation were important. The legal issues were serious and complex, and the amount sought – over $6 million – was substantial. St. Paul was successful in having these claims dismissed entirely.

b. St. Paul actually paid over $300,000 in costs with respect to all three actions. These costs were incurred over the preceding 18 years since the litigation between the parties arose. St. Paul has thus also lost the value of the money over time. It is entitled to some measure of indemnity.

c. The plaintiffs did not produce evidence of their costs over the duration of the action. I draw no adverse inference from this because I accept that the information from previous counsel was not available. However, St. Paul advises that the plaintiffs’ counsel confirmed that his retainer became active in the three months prior to trial and he charged $100,000 for his work. In the circumstances, with litigation that spanned over 18 years, in which significant sums were sought, and given the fees the plaintiffs themselves paid, I conclude that the plaintiffs would reasonably have expected St. Paul to invest significant sums in defending the action.

d. St. Paul has not taken any improper steps in the litigation, or refused to admit anything that should have been admitted. Rather, St. Paul has conducted itself responsibly, in particular by proposing a bifurcation of the trial to deal with the coverage issues first, which substantially shortened the trial from the length it would have been had the quantum of losses been in issue as well.

[16] The plaintiffs also seek reductions for a summary judgment motion they say was unnecessary. I do not accept the plaintiffs’ argument that costs should be discounted because of a summary judgment motion that did not proceed. St. Paul has explained the history of the summary judgment motion and I am not prepared to conclude that it was unnecessary or a waste of time or effort.

[17] The plaintiffs also argue for deductions to St. Paul’s bill of costs in respect of fees relating to St. Paul’s settlement with the receiver and an expert report which addresses issues in both the first and second action. These items have already been taken into account by virtue of my determination that only 65% of the bill of costs relates to the first action. No further reduction is warranted.

[18] Thus, taking into account the time expended, the importance of the issues, the conduct of the parties, the reasonable expectations of the plaintiffs and the principle of indemnity, and reducing the claimed costs to account for the costs of the second action and the earlier action, I conclude that costs in the amount of $179,372.03, inclusive of HST and disbursements, are appropriate. This amount is 65% of the amount shown on St. Paul’s bill of costs and, in my view, reflects a fair and reasonable amount for the costs of the first action on a partial indemnity scale.

Akbarali J.

Date: May 24, 2018